I am an Assistant Professor of Economics at the Graduate School of Economics at the University of Tokyo.

Postdoctoral Research Associate at the University of Cambridge (2021-2022).
Ph.D. in Economics from the University of Pennsylvania (2021).

Field: Macroeconomics and Finance
Contact: hlee [at] e.u-tokyo.ac.jp 


Working papers

Striking While the Iron Is Cold: Fragility after a Surge of Lumpy Investments [appendix] [RePEc]

This paper studies the endogenous state dependence of the aggregate investment dynamics stemming from synchronized lumpy investments at the firm level. I develop a heterogeneous-firm real business cycle model where the semi-elasticities of large and small firms’ investments are matched with the empirical estimates. In the model, following a negative TFP shock, the timings of large firms’ lumpy investments are persistently synchronized due to the low sensitivity to the general equilibrium effect, leading to a surge of lumpy investments. After the surge, TFP-induced recessions are especially severe, and the semi-elasticity of the aggregate investment drops significantly.

Job market paper version: link

A Dynamically Consistent Global Nonlinear Solution Method in the Sequence Space and Applications
[appendix] [sample codes] [slides] [RePEc]

This paper develops a global nonlinear solution method in the sequence space for dynamic stochastic general equilibrium models. The method utilizes the equilibrium’s ergodicity: if a simulated path of the aggregate shock is long enough, all the possible equilibrium outcomes are realized somewhere on the path. Then, the conditional expectation at each period can be completely characterized by identifying the periods of each possible future state realization and combining the corresponding time-specific value (policy) functions without a law of motion or parametrized expectation. I theoretically show that a sufficient statistic can be used for a complex aggregate state, including distributions, when the individual value (policy) functions are strictly monotone in the statistic. Despite its simple implementation, the computation is highly efficient, bypassing fixed-point problems in each iteration, including non-trivial market clearing. 

Top Income Inequality and the Business Cycle

This paper studies how the pass-through businesses of top income earners affect the aggregate fluctuations in the U.S. economy. I develop a heterogeneous-household real business cycle model with endogenous labor supply and occupational choice and calibrate the model to capture the observed top income inequality. Compared to the counterfactual economy with the factor-income-driven top income inequality, the economy in the baseline model features the aggregate fluctuations that outperform in explaining the recent changes in the business cycle: 1) lower volatility of aggregate output and 2) stronger negative correlation between labor hour and productivity. Heterogeneous labor demand sensitivities to TFP shocks between pass-through businesses and C-corporations build the core of the aggregate dynamics, and the aggregate employment dynamics display substantial nonlinearity due to this heterogeneity.

Disclosure Regulation, Intangible Capital and the Disappearance of Public Firms (with Sara Casella and Sergio Villalvazo) [appendix] [feds working paper] [slides]

Since the mid-1990s, the number of listed firms in the U.S. has halved, and their public disclosure has become opaquer. To explain these trends, we develop a general equilibrium model where the choices of going public or private and the transparency of voluntary disclosure are characterized analytically. In the equilibrium, the stock market with directed search and the private equity market with random search co-exist. Going public with transparent disclosure leads to greater funding at the cost of a firm’s competitiveness through knowledge spillover. According to the estimation, stricter disclosure regulation and increased intangible capital share are the key drivers of the observed patterns. Lastly, we characterize a policymaker’s trade-off between welfare and productivity and analyze the optimal disclosure policy.

Bridging Micro and Macro Production Functions: The Fiscal Multiplier of Infrastructure Investment (with Minsu Chang) [appendix

This paper investigates the fiscal multiplier of infrastructure investment using an estimated heterogeneous-firm general equilibrium model. We show theoretically and quantitatively that the firm-level non-rivalry in infrastructure usage drives a significant discrepancy between the estimated input elasticities at the firm level and the state level. In addition, we link our firm-level production function to a canonical production function in a representative-agent framework (Baxter and King, 1993). The quantitative findings indicate a fiscal multiplier of approximately 1.09 over a 2-year horizon, suggesting a moderate net economic benefit from infrastructure investment, which is significantly higher than the representative-agent model prediction. This is due to the low sensitivity of the firm-level investment to the general equilibrium effect, leading to a dampened crowding out.


The Risk-Premium Channel of Uncertainty: Implications for Unemployment and Inflation (with Lukas B. Freund and Pontus Rendahl) [replication codes]
- Review of Economic Dynamics, Volume 51, December 2023, Pages 117-137

This paper studies the role of macroeconomic uncertainty in a search-and-matching framework with risk-averse households. Heightened uncertainty about future productivity reduces current economic activity even in the absence of nominal rigidities. A risk-premium mechanism accounts for this result. As future asset prices become more volatile and covary more positively with aggregate consumption, the risk premium rises in the present. The associated downward pressure on current asset values lowers firm entry, making it harder for workers to find jobs and reducing supply. With nominal rigidities the recession is exacerbated, as a more uncertain future reinforces households’ precautionary behavior, which causes demand to contract. Counterfactual analyses using a calibrated model imply that unemployment would rise by less than half as much absent the risk-premium channel. The presence of this mechanism implies that uncertainty shocks are less deflationary than regular demand shocks, nor can they be fully neutralized by monetary policy.

Work in progress

Rising Intangibles and Technology-Biased Technical Change (with Jesús Fernández-Villaverde

An Analytic Theory of Frictional Firm Dynamics (with Vasco M. Carvalho

Labor Market Impact of M&A and Skill Complementarity (with Minji Bang

From Spreads to Spirals: How Financial Frictions Drive Lumpy Investments (with Miguel H. Ferreira and Timo Haber

State-dependent Nonlinear Search and Matching (with Philip Schnattinger and Francesco Zanetti

Nonlinear Inflation Dynamics in the Canonical Calvo Pricing Model (with Kao Nomura